[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Notices]
[Pages 38216-38218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18760]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23306; 812-10578]


Calvert Social Investment Fund, et al.; Notice of Application

July 8, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under sections 6(c) and 
17(b) of the Investment Company Act of 1940 (the ``Act'') for an 
exemption from section 17(a) of the Act and under section 17(d) of the 
Act and rule 17d-1 under the Act.

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SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered investment companies to invest up to a specified percentage 
of their assets in an affiliated non-profit social and community 
development foundation.

APPLICANTS: Calvert Social Investment Fund (``CSIF''), The Calvert 
Fund, Calvert World Values Fund, Inc. and any existing or future 
registered investment company, advised by Calvert Asset Management 
Company, Inc. (``CAMCO'') and whose investment policies permit 
investment in the Calvert Social Investment Foundation (``Funds'').\1\

    \1\ All existing Funds that currently intend to rely on the 
order have been named as applicants. Any other existing Funds and 
any future Funds will rely on the order only in accordance with its 
terms and conditions.
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FILING DATES: The application was filed on March 17, 1997, and amended 
on September 2, 1997, May 18, 1998, and June 11, 1998.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on August 3, 1998, 
and should be accompanied by proof of service on applicants, in the 
form of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request notification by writing to the SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants, 4550 Montgomery Avenue, Bethesda, MD 20814.

FOR FURTHER INFORMATION CONTACT:
Mary Kay Frech, Branch Chief, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch 450 Fifth Street, N.W., Washington, D.C. 
20549 (tel. 202-942-8090).

Applicant's Representations

    1. Each Fund is registered under the Act as an open-end management 
investment company. CSIF and The Calvert Fund are organized as 
Massachusetts business trusts. The Calvert World Values Fund, Inc. is 
organized as a Maryland corporation.

[[Page 38217]]

The Funds' investment adviser is CAMCO, an investment adviser 
registered under the Investment Advisers Act of 1940.
    2. Each Fund's investment policy permits it to invest a specified 
percentage of its assets in high social impact investments (``HSII'') 
that offer a rate of return below the prevailing market rate and that 
present attractive opportunities for furthering the Fund's social 
criteria.\2\ HSII are typically illiquid and unrated and generally 
considered non-investment grade debt securities which involve a greater 
risk of default or price decline than investment-grade securities. Each 
Funds' investments in HSII were approved by the Fund's shareholders.
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    \2\ CSIF's investment policy permits investment of less than 1% 
of its assets in HSII. The policies of the Calvert International 
Equity Fund (a series of the Calvert World Values Fund, Inc.) and 
the Calvert New Vision Small Cap Fund (a series of The Calvert Fund) 
permit investment up to 1% and 3%, respectively, of their assets in 
HSII. The policy of the Calvert Capital Accumulation Fund (a series 
of Calvert World Values Fund, Inc.) permits investment of up to 3% 
of its assets in HSII when its assets reach $100 million.
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    3. The Funds currently invest directly in community organizations 
and other HSII. Applicants propose to invest assets, allocated for 
investment in HSII, in the Calvert Social Investment Foundation 
(``Foundation''). The Foundation will then place the assets in the 
community.
    4. The Foundation is a non-profit organization that seeks to use 
community development opportunities to assist the poor, correct social 
injustices, and improve society in a pro-active way. The Foundation's 
securities are exempt from registration under section 3(a)(4) of the 
Securities Act of 1933. The Foundation is exempt from registration as 
an investment company under section 3(c)(10)(A) of the Act. The 
Foundation has nine directors, eight of whom are members of CSIF's 
board of trustees, four of whom are members of The Calvert Fund's board 
of trustees, and four of whom are members of the Calvert World Values 
Fund, Inc.'s board of directors.
    5. The Foundation receives grants and loans from various 
foundations and Acacia Mutual Life Insurance Company (``Acacia''), the 
parent company of the Funds' investment adviser. The Foundation also 
receives funding from individual investors, through a program called 
Calvert Community Investments (``CI''). Investments in the Foundation 
are evidenced by Calvert Community Investments notes (``CI Notes''). 
Investors in CI Notes are allowed to choose the interest rate (ranging 
from 0% to 4%) that they would like to receive on their investment. The 
average interest rate currently for CI Notes is 3%. The Foundation 
generally realizes a basis point spread on each investment to cover 
administrative and overhead costs. The basis point spread is the 
difference between the interest rate that purchasers of the CI Notes 
receive and the average interest rate at which the Foundation makes 
investments in community development organizations.
    6. Under the proposed arrangement, each Fund will receive a CI Note 
evidencing its investment in the Foundation. The Funds' boards of 
trustees/directors (``Boards'') will determine the interest rate and 
the maturity of the CI Notes that the Funds receive from the 
Foundation. The Funds' assets invested in the Foundation will be pooled 
with the Foundation's other assets and will be used by the Foundation 
to make investments in community development organizations. The 
Foundation's investments are evidenced by promissory notes at below 
market rates in amounts between $50,000 and $500,000 each and for terms 
of one, three, or five years, with interest rate currently ranging from 
4.5% to 8.8%. Applicants expect that a Fund will invest in the CI Notes 
quarterly.
    7. Each Fund will invest its HSII assets in the CI Notes only in 
accordance with its investment objectives, policies and restrictions. 
Each Fund's Board will monitor this proposed arrangement to ensure that 
it is consistent with the Fund's investment objectives, policies and 
restrictions. Each Fund's Board also will periodically review the 
adequacy of the Fund's disclosure of the proposed arrangement and of 
the possible risks of loss to the Fund and its shareholders. The 
percentage of each Fund's assets which may be invested in HSII will not 
be increased without shareholder approval. Any future Fund relying on 
the requested relief will obtain prior shareholder approval to invest 
in the Foundation.
    8. Neither the Funds, CAMCO, nor the Funds' subadvisers will invest 
directly in the organizations in which the Foundation invests or plans 
to invest. Neither Acacia, CAMCO, nor the Funds' subadvisers will 
invest in the Foundation by purchasing CI Notes. Further, neither CAMCO 
nor any subadviser will receive any compensation for the Funds' 
investment in CI Notes.

Applicants' Legal Analysis

A. Section 17(a)

    1. Section 17(a) of the Act makes it unlawful for any affiliated 
person of a registered investment company, acting as principal, to sell 
or purchase any security to or from the company. Section 2(a)(3) of the 
Act defines an affiliated person of an investment company as any person 
directly or indirectly controlling, controlled by, or under common 
control with such investment company, and any officer, director, 
partner, copartner, or employee of the investment company. Section 
2(a)(36) defines a security to include, among other things, any note, 
stock treasury stock, or evidence of indebtedness. Applicants believe 
that the Foundation may be considered to be an affiliated person of the 
Funds due to common directors/trustees that serve on the boards of the 
Funds and the Foundation. Thus, investment by the Funds in the CI Notes 
may be prohibited by section 17(a).
    2. Section 17(b) of the Act authorities the SEC to exempt a 
transaction from section 17(a) if the terms of the proposed 
transaction, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, and the proposed transaction is consistent with the 
policy of each investment company concerned and the general purposes of 
the Act. Section 6(c) authorizes the Commission to exempt transactions 
from the provisions of the Act to the extent that such exemptions are 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policies and 
provisions of the Act.
    3. Applicants believe that the Funds' proposed investment in the 
Foundation meets the standards of section 17(b) and 6(c). Applicants 
state that the Fund's investment in the Foundation will be consistent 
with each Fund's investment objectives, policies and restrictions and 
that investment in HSII has been approved by each Fund's shareholders. 
Applicants assert that each Fund will likely recognize certain 
economies of scale by having the Foundation undertake analysis, placing 
and processing of prospective investments in HSII. Each Fund's 
investments in HSII through the Foundation will be on the same terms 
and in the same amounts as currently made directly, with comparable 
rates of interest.

B. Section 17(d) and Rule 17d-1

    1. Section 17(d) of the Act and rule 17d-1 prohibit an affiliated 
person of a

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registered investment company, acting as principal, from participating 
in any joint arrangement with the investment company unless the SEC has 
issued an order authorizing the arrangement. Applicants believe that 
each Fund may be deemed to be participating in a joint transaction with 
each other Fund through the pooling of assets in the Foundation, and 
that the Funds could be deemed to be participating in a joint 
transaction with the Foundation through their investments in HSII.
    2. In determining whether to grant an exemption under rule 17d-1, 
the SEC considers whether the investment company's participation in the 
joint enterprises in consistent with the provisions, policies and 
purposes of the Act, and the extend to which such participation is on a 
basis different from or less advantageous than that of other 
participants. Applicants assert that all investors in the Foundation 
will participate on the same basis.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18760 Filed 7-14-98; 8:45 am]
BILLING CODE 8010-01-M